The Big, Bad News (BBN) for me is that the
price of food is going up in general inflation
around the world, by which is meant that the
staggering amount of money and crushing debts that
moronic governments have allowed their central
banks to create has, as it must, finally turned
into inflation in prices of commodities instead of
always turning into inflation in asset prices.
Bill Bonner at The Daily Reckoning writes,
"To show you the scope of the phenomenon, we pull
out a copy of The New York Times from October 19,
1896. There, it is recorded in black and white
that the average wheat price was about US$1 a
bushel - in gold - during the previous 20 years.
An ounce of gold would buy you 20 bushels of
wheat. Today, you can buy a bushel of
wheat
for
about $12, which means, an ounce of gold will buy
about 75 bushels of wheat."
The upshot of
this is that "In terms of real money - gold - the
price of wheat has gone down for more than 100
years. However fast farmers have added to the
world's wheat output, in other words, central
banks have outdone them, planting far more acreage
in paper money."
And it is not just food
where prices run amok, as the Bureau of Labor
Statistics reported that the Producer Price Index
for Finished Goods increased 1.1% in March, which
is (I guess) supposed to be somehow even minimally
mitigating to my horror and sense of impending
doom because the result is "seasonally adjusted".
And lest you think this is some
aberration, the index also rose 0.3% in February
and 1.0% in January. Yikes! That's Inflation of
the third kind, which is how I both make a point
that inflation is tangible and also how I cleverly
introduce my new Mogambo Mega Movie (MMM)
production, Inflation of the Third Kind, which is
pretty much a rip-off of the movie of a similar
name, except that only cute cheerleaders in
borderline scandalous, scanty outfits "hear the
call" and converge at a mesa in the Old West,
where they are the only ones who are spared when a
spaceship full of inflation monsters suddenly
appears, and the inflation monsters pour out of
the spaceship and eat everybody EXCEPT the cute
cheerleaders and those people who are smart enough
to buy gold, and there is this big party at the
end where all the smart people are eating like
gluttonous pigs and talking about how nice it is
not to have been eaten by inflation monsters, and
generally having a wonderful time while all the
cheerleaders are cheering about gold (such as
"Two, four, six, eight. Gold saving your financial
butt is really great!"), and I think I can clean
it up with some skilful editing to escape an "XXX"
rating, so it will be fun for the entire family!
And you will be looking for some fun when
I tell you that even worse, prices received by
producers of intermediate goods rose 2.3% in
March.
And if you want something to color
your nightmares with hues of blood and bile, the
Crude Goods Index advanced 8.0% in March! In fact,
later on in the report we learn that "prices for
crude goods surged at a 73.4% seasonally-adjusted
annual rate for the three months ended in March
after jumping at a 67.7% SAAR for the three months
ended in December." At this news I am gagging on
my tongue in sheer terror! Gaaaahhh!
It is
almost a relief to learn that "during the first
quarter of 2008, the finished goods index rose at
a 10.2% SAAR, after climbing at an 11.5% SAAR
during the fourth quarter of 2007." My God! This
is all inflation news that is beyond terrible, but
it seems so much less than that after the 73% rate
of crude goods! But the reality is that we're
freaking doomed, whether it seems like it or not!
The prices for finished energy goods rose
a blistering 22.5% SAAR for the quarter that ended
in March, and the index rose a mind-boggling 44.1%
SAAR for previous quarter! The mind reels!
And speaking of energy, at the same time
as oil popped over a new record of $113 per
barrel, we get the news from The Financial Times
that "Russian oil production has peaked and may
never return to current levels, one of the
country's top energy executives has warned,
fueling concerns that the world's biggest oil
producers cannot keep up with rampant Asian
demand."
Those of you familiar with the
old supply/demand dynamic can easily plug in
rising demand and falling supply to forecast
higher prices; and those of you who cannot will
merely pay them. Hahahaha! I made a joke!
"The Russian government has so far
admitted that production growth has stagnated",
but is trying to keep "expectations anchored" (as
seems to be all the rage with central bankers
these days), and "has shied away from admitting
that post-Soviet output has peaked."
Either way, diminished supply against
rising demand means higher prices for oil!
Which brings up just one more reason to
buy silver, gold and oil, as if you needed one
more reason, on top of the other tonnes of
reasons, to buy them, but there you are!
Richard Daughty
is general partner and COO for Smith Consultant
Group, serving the financial and medical
communities, and the editor of The Mogambo Guru
economic newsletter - an avocational exercise to
heap disrespect on those who desperately deserve
it.
(Republished with permission from
The Daily
Reckoning .
Copyright 2008, The Daily
Reckoning.)
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